At the present time, foreign individuals working in Vietnam are only subject to compulsory government Health Insurance and Personal Income Tax on their salary. However, changes from 1 January 2018 will result in Social Insurance becoming compulsory for most foreign employees in Vietnam. With a total impact to salaries of up to 25.5% (17.5% employer portion and 8% employee portion), this may result in a substantial impact on payroll costs and take-home salaries.Download PDF
Vietnamese Laws have excluded foreign employees from the Social and Unemployment Insurance requirements that local employees have been subjected to for many years. From 1 January 2018 the Law on Social Insurance will include foreign employees for the first time.
This means that, subject to caps (which are discussed below, and which reduce the impact significantly for some), foreign employees that hold Work Permits, Practice Certificates or Licenses will be liable for 8% Social Insurance and 1.5% Health Insurance from their salaries, and their employers will pay 17.5% Social Insurance and 3% Health Insurance on top of the salaries. Prior to 1 January 2018, only the Health Insurance portion was payable.
There are still differences with compulsory insurances between local and foreign employees – Unemployment Insurance will still be only applicable to local employees and not foreign employees from 1 January 2018.
A further change that comes into effect from 1 January 2018 is that Social Insurance will apply to contracts of 1 month or more (currently this is 3 months or greater), which will generally effect local individuals with service agreements more than for foreign employees.
The saving grace for many individuals is that the Social and Health Insurance requirements are subject to a maximum salary cap, being 20 times the Minimum Basic Wage, or 26,000,000VND per month. Any portion the salary above this threshold will not be subject to Social or Health Insurance.
IMPACT ON SALARIES
Let’s look at some of the impacts on salaries, using $2,000, $3,500 and $8,000 per month as example salaries.
Current (2017) Position (USD)
|Gross Salary||Personal Income Tax||Employee HI & SI||Total Government Portion from Employee||Employee "Take Home" Salary after Government Deductions||Employer HI & SI Contributions|